Mutual fund dealers are being urged to guard against failings in the know-your-client (KYC) process.
According to a bulletin from the Mutual Fund Dealers Association of Canada (MFDA) that details priorities for the coming year, the self-regulatory organization’s latest round of compliance examinations and a sweep of advisors uncovered a pattern of uniform KYC information. “In these cases, all or nearly all clients have similar or identical information recorded for risk tolerance, investment objectives and time horizon,” the MFDA reports.
The SRO says it will continue to watch for this issue in its compliance exams, and also calls on dealers to review their reps “to detect any such patterns in their documented KYC information and take steps as necessary to reassess the KYC information where concerns are identified.”
The MFDA says that its sweep, which is making greater use of data and technology to identify patterns that may raise regulatory concerns, will soon be complete and that it will be addressing its findings with firms. The regulator also plans to publish the results, including any recommendations for the industry, this spring.
Further, the SRO says it will issue a report this year that details results of a review of dealers’ policies and procedures for supervising advisors who receive promotional items from fund companies.
In the coming year, the MFDA also intends to finalize continuing education requirements for reps, enhance its outreach to both the industry and investors, and complete the latest edition of its client research project (firms must submit data by March 15). It also plans to hold its third summit on senior investors in the fall. And it reports that it’s currently reviewing its rules to ensure they pose no barriers to innovation.
The notice indicates that the MFDA’s enforcement priorities for the coming year will include abusive sales practices, suitability and leveraging recommendations, seniors, complaint handling, outside business activity and dealer supervision.